A pip is the smallest unit of change in a currency pair's price: on EUR/USD quoted at 1.0850, it is the fourth decimal, and a move to 1.0851 is one pip. A spread, a stop or a gain are counted in pips, and each pip has a money value that depends on the pair and on the volume.
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The pip is the unit in which forex counts its price changes. The National Futures Association, which regulates forex dealers in the United States, defines it in its brochure on retail forex trading as the smallest unit of trading in a foreign currency price, and the CFTC glossary says the same: the smallest price unit of a commodity or currency.
On most pairs, that position is the fourth decimal. The European Central Bank publishes its euro reference rate against the dollar to four decimals and against the yen to two, on its reference exchange rates page, and broker quotes follow the same convention: a pip is 0.0001 on EUR/USD and 0.01 on yen pairs. Many platforms display one more digit, 1.08503 instead of 1.0850: that fifth digit is a pipette, one tenth of a pip, which the broker IG describes in its pip definition as an additional decimal displayed by some brokers, a regulated broker's source rather than a regulator's.
A pip is used to measure a distance on the chart without talking money, then to convert it into money once the volume is known. The NFA brochure does both in one line: euros bought at 1.2178 and sold at 1.2188 on 100,000 euros make $100, ten pips at $10 a pip. Our lesson on the forex market places this unit inside how forex works.
Pip value (quote currency) = pip size × volume
Pip value (account currency) = quote-currency value, converted at the current rate
The pip size is 0.0001 on a pair quoted to four decimals and 0.01 on a yen pair. The volume is the number of base-currency units: 100,000 for a standard lot, 10,000 for a mini lot, 1,000 for a micro lot, the sizes given by IG's page on forex lots, a broker source regulated by the FCA.
The result lands in the quote currency, the second of the pair. If your account is in another currency, a conversion at the current rate remains, which the NFA brochure points out for pairs whose quote currency is not the dollar. When your account is in the base currency, it goes through the pair's own rate: on USD/JPY at 150.00, 1,000 yen is 1,000 ÷ 150 = $6.67.
| Displayed quote | How it reads |
|---|---|
| 1.0850 | Four decimals: the pip is the last digit. From 1.0850 to 1.0851, 1 pip. |
| 1.08503 | Five decimals: the last digit is a pipette. From 1.08503 to 1.08513, 1 pip, or 10 pipettes. |
| 150.25 | Yen pair, two decimals: the pip is the second digit. From 150.25 to 150.26, 1 pip. |
| 4,512.25 | Index on a futures contract: neither pip nor pipette, the unit is the contract's tick. |
A pip is a position, not a digit. That position is not read from the number of decimals displayed, which depends on the broker, but from the pair's convention.
That is where mistakes are born. From 1.08503 to 1.08623 there are 120 pipettes and 12 pips: whoever counts pips at the last decimal is off by a factor of ten.
The same 30-pip distance risks $3, $200, $300 or $375 depending on the pair and the volume: the number of pips describes the chart, the pip value describes your account.
A 1.2-pip spread, a stop 25 pips under the low, a target 60 pips away: two traders with different accounts talk about the same trade with the same numbers. It is also the unit of levels: the prices of a Fibonacci retracement or the size of a fair value gap are rounded to the pip.
Once the stop is set in pips, the pip value turns the distance into an amount: 30 pips × $10 = $300 per standard lot. The other way round, an accepted risk gives a volume: $100 ÷ (30 × 10) = 0.33 lot. That is the arithmetic detailed in the guide to calculating position size, and the one the pip value calculator does for you.
The first trap is the round number. '$10 a pip' is only true for a standard lot, on a pair quoted in dollars, with a dollar account. On a euro account, a division by the EUR/USD rate remains: at 1.0850, the pip is worth €9.22, 7.8% less than the round number.
The second is the word point, which has two meanings. In the NFA brochure, the spread is the difference 'in points or pips': the two words are synonyms there. In MetaTrader, MetaQuotes' documentation defines _Point as the point size of the symbol in the quote currency and _Digits as the number of decimals in its price: on a five-decimal quote, a point is 0.00001, a pipette, and a stop set at '20 points' in a robot is 2 pips.
The third is the tick, which belongs to futures contracts. The CFTC glossary defines it as the smallest increment of price movement possible in trading a given contract, and each contract sets its own: for the Micro E-mini S&P 500, CME's filing with the CFTC sets the minimum increment at 0.25 index points, equal to $1.25 per contract, on a contract worth $5 per point. The futures calculator does that conversion contract by contract.
The classic mistake. Setting a stop at '20 points' on a five-decimal platform while thinking you are setting 20 pips: the stop is ten times too tight, and the loss looks like a bad trade.
| Indicator | Formula | What it measures | When to use it |
|---|---|---|---|
| Pip | 4th decimal, 2nd on yen pairs | The smallest unit of a currency's quote | Counting a spread, a stop, a gain |
| Pipette | One tenth of a pip | The extra digit of some platforms | Reading a tight spread, never counting a stop |
| Point (MetaTrader) | The last decimal displayed | The platform's internal unit | Setting a robot, after reading the number of decimals |
| Tick (futures) | The minimum increment set by the contract | The smallest change of a futures contract | Pricing a risk on a futures contract |
One line per pair, in your account currency, for a micro lot, recomputed from time to time on the pairs not quoted in your currency.
30 pips on the chart, $100 on the account. The first form is placed, the second is respected.
Before entering a distance in a robot or an alert, look at the symbol's decimals: at five decimals, 20 points are 2 pips.
The smallest unit of a currency pair's quote, as the NFA and the CFTC define it. On EUR/USD quoted at 1.0850, it is the fourth decimal: moving to 1.0851 is one pip. On yen pairs, quoted to two decimals, it is the second.
Pip size × volume, in the quote currency. For a standard lot on a pair quoted in dollars, 100,000 × 0.0001 = $10 per pip; $1 for a mini lot, $0.10 for a micro lot.
The fifth digit after the decimal point that many platforms display, the third decimal on a yen pair: one tenth of a pip. From 1.08503 to 1.08513 is one pip, or ten pipettes.
The point is a synonym for pip in everyday forex vocabulary, but in MetaTrader it is the last decimal displayed, so a pipette at five decimals. The tick is the minimum change of a futures contract: 0.25 index points, or $1.25, on the Micro E-mini S&P 500.
The pip there is 0.01. On USD/JPY with a standard lot, 100,000 × 0.01 = 1,000 yen per pip, or $6.67 at 150.00.
Nothing standardised. On gold, indices or commodities, the unit is the point or the tick, and what a platform calls a pip there is a convention of its own: read the instrument's specification at your broker.
Tradoshi reads the stop from your orders and computes the percentage of capital truly risked on each closed trade.
Before the trade, the position size calculator takes your capital, your risk and your stop in pips, and returns the lot size.
To go deeper on this: read the full guide. Every term is gathered in the glossary.